AP is reporting that Microsoft has taken the market lead from PalmSource, Inc. Microsoft now has 48.1% of third quarter shipments versus 29.8% for Palm OS.

“Analysts had expected Microsoft to grab the market lead from the handheld pioneer this year, but did not expect the Palm OS decline to be so precipitous.

Having Microsoft on your tail, working incessantly on its product, methodically identifying any weaknesses or vulnerabilities in your product, integrating its product to its other applications and systems, with infinite financial resources at its disposal, market power and unwavering perseverance is not a recipe for long-term success—not a matter of if, but when.

We’ve all seen stories of Microsoft being irrecoverably behind competitors in various categories, only to take the lead after the nth iteration of their software.

Next stop: MSN and online services? XBOX and gaming consoles?